A Case Study of Zimbabwe's Gross Domestic Product

Date:  2021-06-24 07:29:15
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Zimbabwe, one of the southern African countries, is among the countries with the lowest Gross Domestic Product (GDP) per capita in the world. The World Bank reported that the annual growth rate averaged 2.85% from 1961 until 2016, with an all-time high of 22.57% in 1970 and a low of -17.67% in 2008. This is as a result of many years of mismanagement and endemic corruption which has adversely affected the economy of the country. Political violence and abuse of human rights have seen the country being subjected to numerous sanctions. This resulted in a decade of contraction and one of the worst cases of hyperinflation of all time, (Kramarenko and Engstrom, 2010), which led to the suspension of the national currency in 2008 and adoption of other currencies including the US dollar, (Noko, 2011). The present sluggish economic growth is expected to continue with the failure of the government to address structural hindrances to growth such as limited capital resource and deficient infrastructure. The primary sources of government revenue are exports of nickel, platinum, diamond, and tobacco.

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The GDP of any state is driven by its economic activities. Since 2000, Zimbabwe embarked on forcibly seizing and redistributing most of the commercial farms owned by the whites to black only citizens and prominent members of the ruling ZANU-PF administration. The new owners lacked agricultural expertise and only achieved short-term gains by selling the land and the equipment. This triggered severe losses on exports and negatively affected market confidence as the idle land is now utilized for subsistence farming, (Kangethe and Serima, 2014). This has been a primary factor behind the low GDP per capita. Government spending is at 29.7% of the GDP. State enterprises are strongly subsidized, with taxes and tariffs being high. The labor market is highly regulated, making it difficult to hire or fire an employee. Unemployment had risen to 95% by 2008.

A 2014 report by Africa Progress Panel on how many years it would take to double per capita GDP in the African countries, Zimbabwe fared the worst with the report showing that with its current rate of development, it would take 190 years to double its per capita GDP. In September 2016, the minister of finance reported huge arrears resulting from low levels of production and attendant trade gap, insignificant foreign direct investment and lack of access to international finance.

There is a direct relationship between the GDP and the economy of a country. Economic growth is calculated as the percent change in the GDP yearly. A country with a positive economic growth will report positive GDP per capita and vice versa. According to a 2012 estimate, agriculture contributed to the GDP by 20.3%; industry contribution was 25.1% while service sector contributed 54.6%. Initially, commercial farming was almost exclusively in the hands of a white minority until the controversial land redistribution program that began in 2000 to black settlers who did not have the expertise to carry on production, (Kangethe and Serima, 2014). Agricultural production decreased steeply with an estimated decrease of 51% between 2000 and 2007, with tobacco production, which is the main export crop, decreasing by 79% from 2000 and 2008.

The mining sector is reported to be rife with corruption, particularly in the diamond sector. A 2012 report by an NGO by the name Reap What You Sow showed a lack of transparency of diamond revenues and claimed that Zimbabwes elite was benefiting from the countrys diamonds. The Associated Press backed the claims up reporting that at least $2 billion worth of diamonds had been stolen from the fields and had enriched President Mugabes ruling circle, various connected gem dealers, and criminals. These factors have resulted to the low GDP in Zimbabwe.

Other factors affecting the economic growth such as inflation, education, and unemployment have also played key roles in determining the GDP of Zimbabwe. This state comprises high literacy rates at over 90%. However, the crisis in the country since 2000 has resulted to most of these elites migrating to other nations diminishing the achievements that they could bring. With unstable inflation and unemployment, the state of the countrys GDP concerning the economy is still wanting.

The trends as seen in the datasets show fluctuations with rises and falls in the GDP annual growth rate. The period between 2000 and 2008 registered the worst rates of negative growth with 2008 reporting a -9.9%. The year 2009 saw the installation of a national unity government which authorized dollarization, (Noko, 2011). This reversed inflation, permitting the banking system to stabilize and the economy to resume slow growth with 2011 reporting a growth rate of 11.9%. However, this increase was short-lived as, after the 2013 general elections, policies encouraging indigenization of the economy were restored and implemented. This created further uncertainty in the economy and negatively impacted the investment climate in the country. The annual growth rate fell to 0.6% in 2016.

To sum this up, the low GDP in Zimbabwe is as a result of the negative economic factors which have mostly been caused by lack of proper administration. A lot of changes in the policies and governance need to be implemented if economic success is to be achieved.

References

Kangethe, S. M., & Serima, J. (2014). Exploring Challenges and Opportunities Embedded in Small-scale Farming in Zimbabwe. J Hum Ecol, 46(2), 177-185.

Kramarenko, V., Engstrom, L., Verdier, G., Fernandez, G., Oppers, S. E., Hughes, R., ... & Coats, W. (2010). Zimbabwe: Challenges and policy options after hyperinflation. African Department Paper, 10(03).

Noko, J. (2011). Dollarization: the case of Zimbabwe. Cato J., 31, 339.

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